Apple, AT&T suspend iPhone 4 sales because of huge demand

Barely a day after its new iPhone went on sale, Apple Inc. and partner AT&T Inc. said they were so slammed with orders that they were temporarily suspending sales to make sure they didn't sell more units than they could make.

Apple said it sold 600,000 phones Tuesday, the day it began taking orders online. That amounted to 10 times more advance orders than it had received for the previous version last year. The new phone hits Apple and partner stores June 24.

The heavy sales triggered widespread glitches encountered by prospective iPhone 4 buyers Tuesday, when for most of the day AT&T's website displayed errors to those trying to order the phone. The new iPhone comes equipped with a much sharper screen and cameras on the front and back that for the first time allow users to make video calls.

Apple apologized Wednesday for what it called "many order and approval system malfunctions" and noted that "many customers were turned away or abandoned the process in frustration."

Although AT&T did not offer an explanation for its system glitches, it did say there were 13 million visits to its website Tuesday by users interested in upgrading their phones, for which it is the exclusive wireless carrier.

"That number is about three times higher than the previous record for eligibility upgrade checks in one day," the company said in a statement.

But AT&T's trouble handling the demand for new phones was reminiscent of its issues supporting the heavy load on its wireless networks, which it says are handling 50 times as much data as they were three years ago.

Loaded down with all that traffic, AT&T has earned a reputation for spotty cellular coverage, slow loading time for Web pages and dropped calls. In January, Consumer Reports released a survey of 54,000 consumers in which AT&T was ranked last among wireless providers in 19 of the 26 major cities included in the study.

"They've had three years now to patch these leaks," Doherty said, noting that if AT&T wasn't careful the iPhone's continued success could be a liability. "Every time the boat takes on a few extra passengers, it springs a leak again."

Still, AT&T has remained confident in its ability to handle the ever-increasing load in its networks. The company says that over the last two years it has spent upward of $19 billion expanding and enhancing its 3G networks, and that it drops only about 1% of its calls on a nationwide basis.

"We made a bet about four years ago on mobile broadband and began investing very aggressively in a network that would accommodate a lot of mobile data traffic," AT&T Chief Executive Randall Stephenson said Tuesday in an interview on CNBC. "And we bet right."

Chris Larsen, a telecommunications analyst at Piper Jaffray & Co., said the quality of AT&T's wireless network had improved dramatically in the last year.

"If you'd asked me a year ago, could they handle a very successful iPhone 4 launch, the answer was no," Larsen said. "But they've done a lot of groundwork in the last six months, so it should be OK."

"That said, if they sell three times the number of phones we all expect," he added, "then, yeah, we might have a problem."